Steward hospitals continues to lose money

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Steward Health Care System continues to lose money on its hospitals more than two years after the company was created by a private equity firm to take over the former Caritas Christi Health Care chain in eastern Massachusetts, according to newly released state figures.

Nine of Steward’s 10 hospitals were unprofitable in the January-to-March quarter, including its two Boston hospitals. St. Elizabeth’s Medical Center in Brighton posted a quarterly loss of about $667,000, while Carney Hospital in Dorchester registered a deficit of $2.7 million. Quincy Medical Center, which Steward acquired in 2011, reported the system’s largest loss — $5.6 million. Saint Anne's Hospital in Fall River was the only profitable Steward hospital, with earnings of $4.7 million.

The data were included in a report from the state Center for Health Information and Analysis. Overall, the report showed, the median profit margin for the state’s 65 acute care hospitals fell to 3 percent in the period ended March 31 from 3.8 percent during the 2012 fiscal year, with the bottom 25 percent of hospitals losing money.

For most of the state’s nonprofit hospitals, which start their fiscal years on Oct. 1, the numbers cover six months. The figures for Steward, which operates on a calendar year, cover only three months, while the report details numbers for nine months at Cambridge Health Alliance, whose fiscal year ends June 30, according to state officials. Cambridge Health Alliance, which operates safety-net hospitals treating many low-income residents, lost $17.8 million during that time.

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The most profitable Massachusetts hospitals, according to the state, were Children’s Hospital Boston, which earned $93.2 million; UMass Memorial Medical Center of Worcester, at $70.7 million; Beth Israel Deaconess Medical Center of Boston, with $67.4 million; and Baystate Medical Center of Springfield, which reported $55.4 million in earnings.

Massachusetts General Hospital earned $48.5 million, while Brigham and Women’s Hospital earned $41.6 million. Both are run by Boston-based Partners HealthCare System. Another Partners hospital, North Shore Medical Center in Salem, lost $12.8 million.

The report provides a snapshot of financial performance in the hospital industry, which has always operated on thin margins, but offers no predictions on where the sector is heading. While profitability and other measures are down from 2012, they remain above 2009 and 2011 levels, which were especially tough years for the Massachusetts health care industry. Still, there is no doubt medical centers are being squeezed on multiple fronts.

The Patrick administration and employers have been pushing to control health care costs, while health insurers have given doctors incentives to keep patients out of the hospital, said Aron Boros, executive director of the Center for Health Information and Analysis. At the same time, he said, higher deductibles and copays may be prompting some patients to delay elective procedures or seek lower-cost care at clinics and other settings outside hospitals.

“All hospitals in Massachusetts face the pressure,” Boros said. He said poorer hospitals are finding it harder to borrow money, making them more likely to merge with larger health care systems that can help them buy information technology and medical equipment. “Capital budget pressures are leading hospitals without deep pockets to seek other ways of financing,” he said.

Alan Sager, professor of health policy and management at Boston University’s School of Public Health, said the report underscores disparities between struggling community hospitals and richer academic medical centers that receive more lucrative reimbursements from insurers.

“The most profitable hospitals are the ones that are able to command higher payments,” Sager said. “We again see the survival of the fattest where profitability has more to do with their market leverage than with efficiency.”

At Steward, owned by New York’s
Cerberus Capital Management, total hospital losses narrowed to $12.2 million in the first quarter of 2013 from $14.3 million a year earlier.

Steward executives last summer said they were investing in capital improvements and expected to begin generating profits within two years. On Wednesday, Steward spokesman Chris Murphy said the company is financially stronger than the state numbers suggest because they don’t reflect revenue from Steward-owned doctors practices, outpatient clinics, surgical centers, insurance products, and other businesses.

“In a world of accountable care organizations, to look at individual hospital performance is not only misleading, but it demonstrates a lack of understanding of health care reform and cost containment,” Murphy said.

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